Microloans and Information Capital

On a sweltering June day in 1999, a few of us from the Sun Microsystems Somerset, NJ office attended the Rising Tide Summit, hosted by Silicon Alley Reporter editor and bubble boy Jason Calacanis. It was intense, even for an event in the frenzy of the dot-com boom. I have only two memories that have survived the post-boom memory contraction: I met BoingBoing editor Xeni Jardin in the basement, when she was both a Hamm and writing for SAR. That has only come up once in conversation since. The more lasting impression was Nancy Barry of Women's World Banking, who spoke about bootstrapping economies through microloans, offering startup capital to labor-intensive, often women-run and home-based businesses, with reasonable payback periods and interest rates.

It was that talk that started my periodic purchase of a cup of coffee for homeless people sitting outside on cold winter days. If I can spend $5 on multiple Dunkies visits, I can also spend a buck or two to keep someone warm. Microgiving. I joked at times that an "I Give A Buck" campaign, aggregating and distributing those dollars, would be feasible. Muhammed Yunus won the 2005 Nobel Prize in Economics for proving that microcredit is both effective and a real concept.

Thanks to , I have discovered Kiva.org, an online microcredit aggregator and facilitator that delivers on all of the above.

Kiva is a great example of what Sun calls bridging the Digital Divide. It's not about moving large sums of money, but moving practical sums of information to those most in need. A $100 million budget doesn't help someone who needs $300, if the money can't be delivered in local currency on short notice. Matching the source of $300, possibly from a dozen sub-$50 lenders, to the borrower is an informational problem; that's the digital divide in real-world, proper-sized granularity. Information is capital, in the sense that it can be used to create value, has forward and time value (both decreasing) and can be exchanged. And information is the capital for the digital divide.

Comments:

Kiva.org does wonderful work. Another resource for great thinking (and doing) is the World Resources Institute, especially the work led by Allen Hammond and CK Prahalad -- you can read all about it at www.nextbillion.net. Very, very cool stuff.

Posted by Noel on June 18, 2007 at 12:41 PM EDT #

Microcredit, as put forward by Muhammed Yunus, is not as relevant in all economies - and this is not said to detract from the immense good that Muhammed's system has brought about.

As well as being your Chief Technologist for the UK and Ireland - I spend time helping out at a UK based Community Development Financial Institution (CDFI) - Street UK Foundation (a registered UK charity).

Street UK was started by Rosalind Copisarow in 2000, after she successfully implemented Microfinance in Poland (she set up Fundusz Mikro in 1994 and after 5 years it had made over 40,000 loans, creating at least 10,000 new jobs).

Street UK was initially set up as a Microfinance organisation (the first in the UK), but found a number of difficulties implementing a similar model to the one Muhammed did in Bangladesh at Grameen Bank, and to the one Rosalind did in Poland at Fundusz Mikro.

Rosalind's report into why Microcredit was not as successful in the UK (and likelihood it would have related issues in similar economies) can be found here "Street UK (A micro-finance organisation): Lessons Learned (From its first three years’ operations)".

It is an essential primer into Microcredit implemented into "First World" economies, or at least one's with a high "Human Development Index" (HDI), and I'd recommend it to anyone who wants to learn more about the subject.

I'm pleased to say that despite the issues they initially found, Street UK has continued to prosper. Since 2006 it has had a Business Model geared toward supporting financially excluded individuals out of debt, welfare & cash-economy dependency on a sustainable basis. One of the most commendable things that it does is give people an alternative to "Door Step Lenders" (or "Loan Sharks" to the rest of us).

In the next few months Street UK will be implementing the UK's first charitable / not for profit "Bill Payments" system, along with Banking facilities to enable savings and increased Financial Literacy.

Pretty good going - and I'm really pleased to be able to support them too.


Posted by Wayne Horkan on June 18, 2007 at 02:34 PM EDT #

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Hal Stern's thoughts on software, services, cloud computing, security, privacy, and data management

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